Emergence of Embedded Finance in 2023


In simple words, embedded finance combines financial solutions with non-financial customer journeys. These solutions improve the customer experience and provide greater satisfaction. For example, as a customer, you can add insurance for a specific product during checkout on the e-commerce website itself.

Embedded finance services include:

  • Banking
  • Credit
  • Investment
  • Payment processing
  • Lending
  • Insurance

This form of finance has increased in popularity because of the flexibility and freedom it offers customers. It streamlines access to financial services making access to finances easier, so that it’s available when the customer needs it. Some very popular companies in India offering embedded financial services include Simpl, Rupifi, LazyPay, and Fundfina.  

How does embedded finance work?

Embedded finance solutions offer flexibility to businesses as well. Thanks to the use of APIs (a type of code), businesses seamlessly integrate plug-and-play financial solutions into their business processes that give them access to banking and payment services for the customer experience while making sure they comply with the regulations of that region.

How the solution is integrated into the overall customer experience depends on the industry and use case.

What are the different examples of Embedded Finance options in India?

Effective embedded solutions are available to the customer when they need them, whether in the form of credit, EMIs, insurance, or something else. 

  1. Buy now, pay later (BNPL) Solutions
    This is the most popular embedded solution in India today. Like the name suggests, “buy now, pay later” (BNPL) solutions enable customers to get the product and pay for it later. There is usually a time period within which the customer needs to clear their debts to avoid interest. They may be able to pay off the amount in multiple installments. By 2026, BNPL is predicted to reach $576 billion in transactions worldwide.
  1. Point-of-service Lending

Similar to long-term loans and financing services offered by banks and other financial institutions, Point-of-service (POS) lending is consumer financing offered at a point of sale instead of at a bank branch. They are usually offered at a zero percent interest rate. However, longer-term loans may be subject to a low interest rate (still less than that offered by banks).

  1. Integrated Insurance Services

Integrated or embedded insurance services provide real-time bundling and sale of insurance coverage or protection at the point of sale while a customer is purchasing a product or service. The travel insurance customers purchase when booking a flight ticket is an example of embedded insurance. Businesses can add insurance services to their customer experience in multiple ways by partnering with FinTech companies. These embedded solutions have grown in popularity as they are flexible, fast, and convenient.  

  1. Embedded payments

Customers can now pay for their purchase without entering their card details via a third-party payment gateway like PhonePe or Google Pay. This helps protect their information online. Moreover, making purchases via these applications also gives them access to discounts and rewards that weren’t available when paying with a debit or credit card. 

  1. Embedded Cards

These cards are alternate payment methods that customers can use to make regular purchases at a specific vendor. They are more cost-effective, convenient, and offer deals that wouldn’t have been available otherwise. Examples of embedded cards include expense cards, corporate cards, smart cards, and so on. Companies can also use embedded cards to make direct payments to their employees.  

How is the embedded finance industry expected to grow in 2023?

As India embraces digitization, millennial and Gen Z customers are looking for faster solutions that meet their needs. Traditional lending models and slow, drawn-out lending processes are the complete opposite of this.

With embedded finance, businesses can create a one-stop digital solution that will allow customers access to financial solutions in one place without having to switch between applications. This will lead to more partnerships between financial and non-financial businesses to offer their customers the best experience.

In 2021, Indian companies raised over $1.2 billion in venture capital. The industry is currently valued at $4.2 billion and expected to grow at a CAGR of 30.4 percent from 2022 to 2030, making India the 4th largest market globally for embedded finance.

The growth of the Embedded Finance industry also points to another significant change – the need for more professionals with expertise in the financial landscape of their region.

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